Stocks Rebound As Oil, Metals Stumble
BY JONAH KERI
INVESTOR'S BUSINESS DAILY
Posted 2/8/2006
Stocks bounced back Wednesday, recouping some recent losses.
The Nasdaq rose 1%, climbing back above its 50-day average and closing at the top of its intraday range. The S&P 500 gained 0.9%. Nasdaq volume edged higher.
Notable gains in higher volume than the previous session are what you want to see after the market flashes a distribution session, as it did Tuesday. Higher volume on an up day tells you that institutional investors are willing to step in and grab shares. NYSE volume ended slightly lower, though, tempering the gains a bit.
Cisco Systems (CSCO) set the market's tone. The networking giant posted fiscal second-quarter earnings that topped estimates. The firm also issued a bullish forecast for fiscal Q3. Cisco traded about 120 million more shares on Wednesday than it did Tuesday, accounting for the small gain in total Nasdaq trading.
A stock market leader in the 1990s, Cisco plunged 90% during the bear market of 2000-02. It's lagged the market the past two years. It is still a heavily weighted stock within the major market indexes. However, Cisco's action doesn't reveal much about the market's top stocks.
Identifying the market's leaders has become trickier lately, given the recent gyrations. A few weeks ago, Google (GOOG) and Apple Computer (AAPL) wielded the technical strength, fundamental power and institutional sponsorship that define true market pacesetters. Both stocks have weakened lately and are now struggling below their 50-day moving averages.
The market has dished out other changes too. Crude oil prices have fallen from a high above $69 a barrel in late January to the current $62-$63 range. That's taken a bite out of energy stocks, which ran up late last year and into January.
Grant Prideco (GRP) gapped down 2.43 to 46.02 on rapid trade, closing below its 50-day. The maker of drill stems and tubular casings used by drilling firms beat Q4 profit views. But its 2006 earnings forecast of $2.40-$2.60 a share disappointed the Street, which expected $2.57. Credo Petroleum (CRED) and Lufkin Industries (LUFK) also fell hard. Both logged big gains before peaking in late January.
Metals stocks have shown signs of fatigue. Aluminum products distributor Empire Resources (ERS) was the biggest loser on the IBD 100, diving 17% in huge volume. The stock doubled in just four weeks before its recent plunge.
Meanwhile, chipmakers surged again as they attempted to fill the leadership void. Niche tech firms such as Radvision (RVSN) and Multi Fineline Electronix (MFLX) also fared well Wednesday. |
